The POU domain gene family has been shown to be important in tissue specific gene regulation during development. It has been proposed that POU class III transcription factors act in a combinatorial fashion to establish various neuronal phenotypes in the brain. We are investigating the role of two of these POU class III factors, XLPOU 1 and XLPOU2, in early neural development. In situ hybridization analysis of Xenopus enbryos has demonstrated that in the neural plate, XLPOU 1 gene expression is restricted to two symmetrical patches corresponding to the future midbrain and hindbrain. In tailbud stage embryos, additional XLPOU 1 gene expression is observed in the forebrain and eyes. XLPOU 2 gene expression is observed in the ventral forebrain, midbrain, and hindbrain. The restricted pattern of gene expression observed with these POU domain genes is unique because these genes are expressed in brain regions more anterior to most of the various homeobox genes that have been identified in vertebrate development. XLPOU (RA) treatment of embryos. The anterior boundary of both of these genes is shifted in the brains of the RA-treated embryos. Furthermore, with moderate doses of RA< XLPOU 1 gene expression is greatly enhanced in the midbrain and eye. XLPOU 1 and XLPOU 2 should prove to be useful markers in studying how the anterior part of the brain is established.